Choked roads drive out tycoon

London has lost a multimillion-pound investment from a leading financial group because of its appalling traffic conditions.

Challenger International - an Australian firm backed by tycoon Kerry Packer - will now take lucrative new business expansion plans to Australia instead.

The firm confirmed it had shelved plans to enter the British pensions market because of the capital's global reputation for congestion which has seen speeds on some roads dip to below 3mph.

The company established a small London office two years ago but had planned to dramatically increase its presence with a £100million-a-year sales push.

However, it has now decided to scrap the expansion plans and concentrate on the Australian market.

Managing director Bill Ireland said: "If we can achieve those sales in Australia without getting stuck in the traffic in London, why would we enter into that market?"

The decision comes in the week that Transport Secretary Alistair Darling warned that congestion "will pose a real threat to jobs and to the status of London as one of the world's leading centres".

He vowed to appoint a traffic director with new legal powers to monitor the time it takes to complete roadworks - and to oversee the rephasing of traffic lights.

Mr Darling also said he would introduce new controls over companies digging up roads, with more night-time working.

All this, however, will come too late to persuade Challenger International, whose net profit doubled to £41 million in the six months to the end of December last year. Other experts have expressed serious concerns over rising congestion levels in the capital at a time when the actual volume of traffic has declined by up to 16 per cent in the centre.

Motoring groups claim that a number of factors - including rephasing of traffic lights, an explosion in roadworks in the run-up to congestion charging and new bus and cycle lanes - have also added to congestion.

The Mayor's Transport for London office today acknowledged-that congestion cost the capital up to £4 million a week but said the congestion charge was the solution.

A spokesman said: "Charging is the way that we are going to tackle congestion, to improve journey times for motorists and businesses alike."

He said the £5-a-day fee would reduce traffic by 10-15 per cent in the centre of London and by 1-2 per cent across the rest of the capital. "It will benefit London's residents and businesses alike," he added. "And all the money raised will go back to transport."-But Jonathan Simpson, of the RAC Foundation, said: "The Mayor's approach to dealing with congestion in London in terms of a lack of strategy for public transport and rushing congestion charging will mean this is just the start of a trickle of firms that begin to leave London."

Some businesses fear that congestion may worsen just outside the charging boundary. Others just inside the zone believe they will be cut off from customers who live on the "wrong" side, who may seek suppliers outside the borders.

This week, Mr Darling questioned whether Mr Livingstone had worked out the details of the charge sufficiently well to ensure that the scheme would not collapse.

"Congestion charging can be, if it is done properly, one way of dealing with congestion but you have to get the detail right," he told the Standard.